The Kelly Criterion in sports betting
What is the Kelly Criterion?
The Kelly Criterion was a system created in 1956 by scientist John Kelly. This criterion can be used both in the purchase and sale of shares on the stock market, and in the casino, or to determine the optimal amount of a sports bet.
If we apply the Kelly criterion formula to sports betting, we will be able to determine the exact amount that should be bet on each of our bets, that is, our stake. This betting system allows us to manage our funds in a more efficient way, avoiding ending up in the negative and that a bad streak causes us bankruptcy.
However, for this it is important to know well how this formula works and use it correctly.
How is the Kelly Criterion used?
The use of Kelly's criterion is apparently simple: to bet based on the probability that we have given to the event, exactly. For this, there is a formula:
Stake (bankroll percentage) = (((Odds x (Probability Estimate / 100)) - 1) / (Odds -1)) x 100
It may seem complicated, but let's explain the use of the Kelly criterion in sports betting with an example. We have a Real Madrid - Barcelona, where after our analysis we give Real Madrid a 52% chance of winning, and the bookmaker offers his victory at odds 2.00. What will be the stake or percentage of the bankroll to bet?
((2 x (52/100)) - 1 / (2 - 1)) x 100 = ((2x0.52) - 1 /1) x 100 = 0.04 x 100 = 4 units (or 4% of the bankroll).
It is a complex formula to calculate, but as we do it it will be very automatic. The most interesting thing is that it allows us to put emotions aside and know exactly how much to bet on each bet. On the other hand, with the Kelly criterion calculator it is difficult to calculate the probability of the event exactly. But that's where our ability to analyze and collect match data will come into play.
Advantages and Disadvantages of the Kelly Criterion
| PRO | CONS |
| It allows to calculate the appropriate stake exactly | It poses some problems in the case of betting on several matches at once |
| It will help to maximize the chances of winning, as well as reduce losses |
It requires a lot of calculations to make each bet |
| Decreases the chances of ending up in bankruptcy | It is possible to incur losses quickly |
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